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May 31, 2011

In similar letters sent earlier today to the Chairman and Ranking Member of the House Judiciary Committee, Secretary of Commerce Gary Locke (at right) outlined the Department of Commerce's position on the House version of the America Invents Act (H.R. 1249), which was reported out of Committee almost seven weeks ago (see "House Judiciary Committee Approves H.R. 1249"). Secretary Locke began each letter by noting that "passage of needed reforms to our patent laws has been a high priority for me during my time as Secretary of Commerce because of its importance to America's competitiveness and our economic growth."

With the Republican-controlled House focused on cost cutting and deficit reduction, the Secretary reminded the letters' recipients, Chairman Lamar Smith (R-TX) and Rep. John Conyers, Jr. (D-MI), that "[e]nactment of a balanced bill is an important part of the Administration's goal of 'out-innovating' our economic competitors and winning the future -- and it can be done with no cost to taxpayers and no addition to the deficit." While acknowledging that the Senate (S. 23) and House versions of the bills are not identical, Secretary Locke stated that the Administration was "confident that the variations between the two can be resolved and that enactment of a bipartisan consensus bill is within reach." The Secretary spent the remainder of each letter outlining the Administration's views on five "key provisions" of the House bill, which he said were "important to our goals of an appropriately funded and well-functioning USPTO and successful passage of a balanced bill."

Secretary Locke started by tackling the first-inventor-to-file provision, declaring that the Administration "strongly support[s] the proposed transition of the United States to a first-inventor-to[-]file system." Arguing that this transition is "an essential feature of any final bill that will simplify the process of acquiring rights while protecting innovators," the Secretary pointed out that "[t]he first-inventor-to-file provision is consistent with the practices of our economic competitors, and would benefit U.S. businesses by providing a more transparent and cost-effective process that puts them on a level playing field with the rest of the world." With regard to the grace period provided by the House bill -- which has been a topic of debate in patent circles since the bill was reported out of Committee -- Secretary Locke contended that H.R. 1249 "provides a more transparent and certain grace period (a key feature of U.S. law) and a definite filing date that enables inventors to promote, fund and market their technology while making them less vulnerable to costly patent challenges, which disadvantage small entity inventors." According to the Secretary, these changes "will benefit all stakeholders, both small and large, regardless of the field of innovation."

Moving to the USPTO fee setting and funding provisions, Secretary Locke stated that the fee-setting authority provided in the bill would allow the USPTO to "ensure full cost recovery at no expense to America's taxpayers," as well as "process applications more quickly and produce higher-quality patents that are less likely to be subject to a court challenge." Pointing to the "deliberative and transparent [fee] review process" set forth in the bill, the Secretary suggested that the bill contained "a comprehensive and appropriate set of mechanisms to ensure all fee changes are well-considered and well-calibrated."

Addressing the bill's post-grant review provisions, the Secretary stated that the Administration "supports establishing a new post-grant review proceeding and retooling the existing post-grant inter partes reexamination procedure," arguing that "[t]hese proceedings will serve to minimize costs and increase certainty by offering efficient and timely alternatives to litigation as a means of reviewing questions of patent validity," and "provide a check on patent examination, ultimately resulting in higher quality patents." As for the Office's ability to handle the burden of these proceedings, Secretary Locke indicated that "[v]arious safeguards and flexibilities are included in the proposed proceedings to enable USPTO to effectively implement and manage them."

With regard to pre-issuance submissions, the Secretary contended that "the opportunity for third parties to submit potentially relevant prior art to the USPTO after publication of an application and before examination" will "increase the quality of patents."

The Secretary closed his letter by discussing the expansion in H.R. 1249 of the prior user defense to all areas of technology, stating that "[a]s a matter of fairness, we believe that innovators who independently create and commercialize technology should not be penalized for, or deprived of, their investment." Taking note of the concerns raised by "some in the university community," Secretary Locke offered "to work with the Committee on any proposed revisions" to the provision.

In a press release concerning Secretary Locke's letter to House leadership, the U.S. Patent and Trademark Office indicated that the America Invents Act "enhances the U.S. patent system by increasing certainty of patent rights through implementation of a first-inventor-to-file standard for patent approval while also reducing the need for cost-prohibitive litigation, which all too often ties up new ideas in court, stifling innovation and holding back job creation," adding that "[u]ltimately, the proposed legislation will provide the most meaningful reforms to the U.S. patent system in 60 years." The release also stated that the legislation will create an "updated patent infrastructure [that] will level the playing field for small enterprises seeking to participate in the global marketplace -- reducing expensive and time-consuming litigation, simplifying the process of acquiring rights and creating a system that mirrors others around the world, all while enhancing American competitiveness and spurring economic growth."

For additional information regarding this and other related topics, please see:

Kevin, since you've taken the neutral reporter stance on this one, I'll ask the question that's on everyone's mind: can someone get us some of whatever drug Gary Locke was on when he wrote that note? Because he clearly wasn't on the same planet the rest of us when he wrote parts of it, and it would be nice if the rest of us could achieve a similar state of obliviousness.

Dan: the "neutral reporter" tone should have alerted you that Don wrote the post. But I can certainly provide an answer, however.

Politics is an interesting process - comparing it to sausage-making doesn't do it justice. What we have here are very bright people who have limited understanding ( willfully blind or otherwise) and who believe that it is more important to be doing something about the economy. If it causes a catastrophe, that will not be evident until it is way past their time in office.

On the bright side, politics may also be what saves us - there is a good chance nothing will pass, as the election nears.

In other news, some patent attorneys think that some small revisions to patent lawl could possibly lead us into a catastrophe. Regardless of the fact that there is no real evidence that the patent system does much of anything other than create one huge bother for all involved. Gimme that ol' time religion, gimme that ol' time religion!

As Edmund Burke stated: "The true danger is when liberty is nibbled away, for expedients, and by parts"

Awarding patents to the highest bidder and not the first innovator in the name of expediency (to reduce backlogs) puts yet another financial roadblock in front of small entrepreneurs attempting to challenge old technologies. Essentially, Congress is essentially trying to reduce the backlog by reducing innovation.

Drastically changing a system that has made the United States a leader in innovation for 220 years is wrong and a slap in the face to what has made America great.

While there are better ways to fix a broken patent system of endless backlogs, the combination of changes being proposed will instead exacerbate the patent backlog, make it harder for early stage companies to raise capital and will ultimately cost jobs instead of creating them.

The greatest travesty is that Congress has not even asked those who innovate. So speak up. Call your Congressman and ask him to hear your voice and tell them the following:

1. Changing from "First to Invent" to "First to File" may be beneficial to large multinational corporations, but awarding those who can afford patent lawyers is unfair and pretty un-American. When a company must use all of their money filing patents (when a logbook will do), there will be little money left for jobs and innovation. As an investor, I would rather my money be spend on jobs and innovation, not paperwork.

...but, hey, the patent office will be generating a lot of revenue by charging for patents applications.

2. Shortening the grace period only reduces the time that a company can perfect their product and get revenue. Yet another unintended consequence of so called reform.

3.Extension of post grant review only extends the time when a patent may be challenged. Extending the time when a company may be challenged just increases my risk as an investor and reduces my interest to invest in startups.

4. I am not sure why the US would change their system to First to File when several other countries like the UK and Japan which did that in the last decade have noted a decline in innovation are are now contemplating a change back to First to Invent.

While the legislation may be well intended, it will have serious long lasting consequences to American Innovation.

Call your congressman and let him know that you oppose this until they can be more thoughtful about it. But first, ask him if he has even read it.

Ok, you're onto me, I *was* on something myself when I wrote that note, improperly identifying Kevin as the author of the post. :-)

I know it's sausage-making (or worse), but that doesn't make it any less painful to watch what should be a straightforward exercise (going from FTI to FTF) get hijacked by a few deep-pocketed companies who are intent on gutting the patent system and succeeding in having provisions inserted that will do just that. Or to see people like Gary Locke play along with that.

I know I'm not alone in being completely in favor of abolishing the practice of fee diversion, but completely against certain other provisions of the House's patent reform bill. While I'm on the fence regarding first-to-file, I think that the provisions limiting the traditional grace period (which inventors need in order to gauge market value) are certainly problematic. What's more, the post-grant review and prior user rights provisions are a nightmare waiting to happen. In other countries where such processes are permitted, there lurks always the strong potential for larger and better-funded entities to harass (and even financially destroy) inventors. If these provisions are not changed, then we can only hope that patent reform will not happen this year.http://www.aminn.org/patent-reform-act-2011-s23